August 23, 2009

Health Care: When "the Worst" Is Enemy of "Bad Enough"

One of the most widely accepted arguments against a government medical plan for the middle class is that it would quash competition -- just what private insurers seem to be doing themselves in many parts of the U.S.

Several studies show that in lots of places, one or two companies dominate the market. Critics say monopolistic conditions drive up premiums paid by employers and individuals.

For Democrats, the answer is a public plan that would compete with private insurers.

Translation for those unschooled in libspeak:

Competition is good for health care.

Some insurance companies are so big, they're almost like governments.

They can dominate small insurance markets.

Ergo, we should introduce an actual government "competitor" to undercut those big insurers.

That way, we can drive them out of business... which will create much more competition in the insurance market!

Okay. I'm not sure how that scenario is supposed to unfold, but it must be something like this: When the government "option" drives Blue Cross, Aetna, and Wellpoint out of business, then smaller insurers can gobble up that suddenly available market share -- because naturally, the underpricing tactics of Obama Insurance Inc. that drove the big insurers into insolvency and bankruptcy would never, ever do the same to smaller, poorly funded insurers.

Do I have the argument straight?

Proponents of a government plan say it could restore a competitive balance and lead to lower costs. For one thing, it wouldn't have to turn a profit.

All right, let's think this one through. You own a grocery store, and you have one major competitor: You sell 20% fat hamburger for $2 a pound, and your competitor sells it for about the same. It costs you $1.85 a pound, taking everything into account (the wholesale beef price, labor, your facilities lease, your maintenance and utilities cost, and of course that big, hefty tax burden). Thus, you make a profit of 15¢ per $2 of gross hamburger revenue, or 7.5%.

Suddenly, Bill Gates decides to open a grocery store right across the street from you. Because he's Bill Freaking Gates and is worth $56 billion, and because he decides prices are too high, he starts selling his 20% fat hamburger for $1.00 a pound.

Bill Gates has the same costs as you; but he can afford to operate at a huge loss for year after year -- because he has all the money in the world.

Your choices are:

Take the loss (85¢ per dollar of gross hamburger revenue, or a loss of 85%) -- multiplied by all the other products that Gatesmart is likewise selling at a staggering loss... and go broke in a few months;

Refuse to be sucked into that game... and see all your customers flow very quickly to Gatesmart, forcing you to go broke in a few months;

Fire most of your staff, stop paying your lease, and turn off all the power to the refrigerated bins, letting all or your meat rot... forcing the local Health Department to shut you down;

Offer to sell your store to Gatesmart and just get out of the grocery business altogether.

Yes, I can certainly see why that would foster competition... among all the different divisions of Gatesmart. That is, shifting back from our analogy to the real proposal, intense competition among all the different branches of government, to see which can drive more private insurers out of business entirely, leaving only that dad-blamed government plan.

It's a scenario that gives pause even to traditional adversaries of the insurance companies.

"The fear and concern is that the public plan could become the market-dominant plan," said Dr. James Rohack, president of the American Medical Association. "When you've got the federal government involved, it can infuse money into a plan to keep it solvent even if the premiums are lower than its actual costs."

Gee... you think?

Here is the real problem with libthink:

[Sen. Olympia] Snowe [RINO-ME, 12% -- !!], among the few Republican senators still trying to come up with a bipartisan compromise, wants to hold back on creating a public plan for now and give insurers one last chance to show if they can keep costs in check.

That's doesn't go far enough for liberals, who are loath to give the insurance industry tens of millions of new customers supported by taxpayer subsidies.

"It would give the industry a windfall without any countervailing force to require them to lower their costs," said Richard Kirsch, national campaign manager for the advocacy group Health Care for America Now. "The insurance companies could continue to jack up premiums while getting a whole new market."

(Note the tacit admission that insuring the uninsured requires "taxpayer subsidies;" in other words, it's not economically viable.)

Liberals utterly reject the fundamental theorem of Capitalism: If all insurance companies are charging premiums out of line with costs, some insurers will lower their premiums to steal away market share, since they can do so and still make a profit. The other insurers will have to lower their own premiums to avoid losing market share -- and the cycle repeats until premiums are as low as they can go while still yielding a barely adequate profit to the insurers (just enough to allow the insurance companies to stay solvent).

Rather, liberals believe the insurance companies will form a cartel, exercise superhuman discipline, and maintain an artificially inflated schedul of premiums. After all, you see how well that has worked out for OPEC; nobody ever cheats!

How about this for a plan to increase competition?

Competition is good for health care.

Some insurance companies are so big, they're almost like governments.

They can dominate small insurance markets.

Ergo, we should find all the barriers to true competition in the market -- and eliminate them, one by one, until there are no impediments left to a true, free market in health insurance.

This will allow smaller competitors to compete more effectively with Big Health, offering smaller, cheaper plans for middle-income folks -- or alternatively, gilt-edged super-expensive plans for rich people... just like the automobile industry, the boat industry, and the housing market.

I realize this isn't as sexy as creating a whole new government entitlement program and spending three or four trillion dollars of somebody else's money... but at least my plan as the virtue of simplicity!

I don't know how this argument could be made any simpler to persuade the simpletons in Congress. Anybody else have an even more elementary formulation?

Hatched by Dafydd on this day, August 23, 2009, at the time of 7:13 AM

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Comments

The following hissed in response by: MarkJM

Dafydd, Your plan is practically perfect in its simplicity! What we need are elected officials that also see the 'beauty' of capitalism, and (more importantly) can effectively espouse its merits to the public. Keep up the great posts!

The above hissed in response by: MarkJM at August 23, 2009 8:10 AM

The following hissed in response by: cdor

How about the brilliant Charles Krauthammer's plan? I heard him on Hugh Hewitt Friday supporting a proposition that would turn all health insurance companies into public utilities. This would be a compromise position to which Republicans could agree, he says. I almost fell out of my chair. My first thought was how does this increase competition? How many choices do you have in who to buy your electricity or natural gas from? Of course this is a guy who thinks Sarah Palin's use of "Death Panels" was highly inflammatory and did not contribute to the debate. My ass, I says. She changed the debate. This is what we get from our elite "thinking" conservative clique of which Rick Moran is attempting to join. Color me unimpressed.

The above hissed in response by: cdor at August 23, 2009 4:42 PM

The following hissed in response by: AD

A question:
Aren't public utilities guaranteed a certain percentage return on equity?

How much of the economy are you willing to declare "public utilities", and do we want the government setting the consumer rates for ever larger segments of the economy?

And don't forget that in order to promote fair competition the food you provide must be exactly the same as Gatesmart(R). If you were, say, to try to differentiate your product by selling 15% fat ground Angus beef that is more expensive but healthier, and just as tasty, then the Gates commission would need to hold hearings to see if there was a dietetic necessity for your up-scale hamburger or whether you were simply trying to inflate the price of food.

Stepping out of the metaphor, I heartily approve of your plan, which is largely the same as what I call my meta-plan in GOP Has No Clue on Healthcare in The Teleoscope. I call it a meta-plan because people afflicted with CCMB (Command and Control Mentality Blindness) will not be able to recognize it as a plan -- it is too indirect. CCMB sufferers require "mandates" and "regulations" to see a plan as a plan. Changing the environment to allow improvements to happen strikes them as wistful thinking.

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